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Australia ViewPoint - Why Pay Sydney Rents October 2017

Industrial rents in Sydney have been consistently higher than in Melbourne. In 2012, Sydney super prime net effective rents (NER) attracted a 40% premium compared to Melbourne; today it is closer to 90% (figure 1).

Strong growth of industrial supply over the past five years in Melbourne outstripped demand, having a moderating impact on rents and causing incentives to grow from 7.5% in 2012 to 25% in 2017. At the same time, Sydney saw constrained supply, particularly in inner city areas as well as withdrawals of industrial stock for residential conversion. This has placed upward pressure on rents.

With this rent spread increasing, Melbourne looks more attractive from an industrial occupier perspective. However, there has been no shortage of occupiers willing to pay Sydney rents.